1981 (9) TMI 173 - AT - Income Tax

Summary

Issues:
1. Interpretation of City Compensatory Allowance as income in the hands of the assessee.
2. Application of provisions under section 16(v) for deduction/exemption.
3. Consideration of rectification under section 154 for the city compensatory allowance.
4. Discrepancy in opinions between the members of the Tribunal.

Analysis:
1. The case involved a dispute regarding the treatment of City Compensatory Allowance received by the assessee as income for the assessment years 1973-74 and 1974-75. The assessee claimed the allowance as exempt under section 10(14) of the Income-tax Act, while the Income Tax Officer (ITO) treated it as part of the assessee's salary during the assessments under section 143(1) of the Act.

2. The assessee, instead of seeking reopening of assessments under section 143(1), filed applications under section 154, asserting that the allowance should be considered as expenditure under section 16(v) of the Act. The ITO rejected the applications, stating there was no apparent mistake and the claim was not made under section 16(v) during the original filing.

3. The Appellate Assistant Commissioner (AAC) overturned the ITO's decision, relying on precedents and directing exclusion of the allowance from taxable income. The revenue appealed, arguing that the deduction was not valid under section 16(v) and that no mistake was evident for rectification under section 154. The Tribunal members differed in their opinions, leading to the reference to a third member.

4. The third member analyzed the applicability of section 16(v) to the city compensatory allowance. It was emphasized that rectification under section 154 is limited to patent errors of fact or law in the ITO's order. The member agreed with the Judicial Member that the AAC's decision was incorrect and needed to be set aside, indicating a discrepancy in the Tribunal's opinions.

5. Ultimately, the matter was referred back to the original Bench for final disposal based on the discussion and conclusion that the city compensatory allowance should not be treated as deductible under section 16(v), and the AAC's decision was erroneous.